Artisan Partners Pressures Japan’s Seven & i Holdings

U.S. fund Artisan Partners Asset Management has increased pressure on Japan’s Seven & i Holdings, urging the retailer’s board to provide an update on a takeover bid from Canada’s Alimentation Couche-Tard (ACT) by September 19.

Artisan Partners Calls for Immediate Action on ACT’s Offer:

In a letter dated Friday, Artisan portfolio manager N. David Samra and Benjamin L. Herrick recommended that Seven & i, the 7-Eleven convenience store chain operator, seriously consider ACT’s offer. They also advised the company to solicit offers for its Japanese subsidiaries “as quickly as possible.”

“ACT is uniquely positioned to enhance (Seven & i’s) corporate value,” Samra and Herrick wrote. “Negotiating with ACT is the best tactic to preserve positive stakeholder outcomes in Japan,” they added, stressing the urgency for the board of directors to engage with ACT immediately to secure the best possible outcome for shareholders.

Lack of Response from Seven & i Raises Concerns:

As of Saturday, phone calls to Seven & i went unanswered, and the company has maintained that it does not comment on individual shareholders. Artisan’s letter, which is highly critical of Seven & i’s efforts to enhance corporate value, highlights the growing pressure from shareholders regarding the potential deal. This transaction could become the largest-ever overseas buyout of a Japanese firm.

ACT, the owner of Circle-K convenience stores, revealed last week that it had approached Seven & i about a possible acquisition, though it did not disclose the potential value of the deal.

Artisan’s Ongoing Criticism and September 19 Deadline:

Artisan has been a critic of Seven & i’s management and structure since 2019, when it became a shareholder. The fund identifies itself as an active shareholder rather than an activist, engaging with corporate management and boards.

The September 19 deadline set by Artisan for an update was based on the bid becoming public on August 19. At that time, Seven & i acknowledged that ACT had proposed buying all company outstanding shares, describing the approach as a “friendly proposal” to reach a mutually agreeable transaction.

Artisan expressed concern over Seven & i’s “lack of official communication” thus far and “rumors” that the company might seek a special designation to block a takeover. Bloomberg News reported that Seven & i was considering seeking designation as a “core” company in Japan, which would necessitate a thorough investigation by the finance ministry of any entity attempting to acquire more than 10% of its shares.

Potential Government Intervention and Corporate Governance Concerns:

Artisan warned that allowing such a designation would contradict the Japanese government’s recent efforts to improve corporate governance, attract overseas investment, and drive the local stock market to record highs this year.

“Government intervention would signal Japan Inc. is not prepared to stand behind these relatively new, yet globally competitive measures to improve asset efficiency,” Artisan’s letter stated. “Shareholders deserve a fair and independent process.”

Artisan currently holds 0.85% of Seven & i’s outstanding shares, according to LSEG data.